KAPCO, Inc., has 100 million shares of $1 par common stock outstanding. If the current market price of the KAPCO common stock is $33 per share, KAPCO would be considered a
A)
small-cap stock.
B)
micro-cap stock.
C)
large-cap stock.
D)
mid-cap stock. correct answers D) By doing the arithmeti...
Series 65 Practice Exam || A+ Guaranteed.
KAPCO, Inc., has 100 million shares of $1 par common stock outstanding. If the current market
price of the KAPCO common stock is $33 per share, KAPCO would be considered a
A)
small-cap stock.
B)
micro-cap stock.
C)
large-cap stock.
D)
mid-cap stock. correct answers D) By doing the arithmetic, we see that the market capitalization
of KAPCO common stock is $3.3 billion. Stocks with a market cap in the range of $2 to $10
billion are considered mid cap.
The issuance of new common stock will affect which of the following balance sheet items?
Total assets
Current liabilities
Retained earnings
Net worth
A)
I and III
B)
II and IV
C)
I and IV
D)
II and III correct answers C) Issuing stock brings in new capital in the form of cash. This raises
the assets and, since stock is equity, raises the net worth by the same amount.
The technical market theory that measures the breadth of the market is
A)
the advance/decline theory.
B)
the short-interest theory.
C)
the support/resistance theory.
D)
the odd-lot theory. correct answers A) The advance/decline theory compares the number of
stocks advancing versus those declining, generally on the New York Stock Exchange. Because it
uses such a large sample, it is used as an example of the breadth of the market.
state-registered & federal covered investment advisers have brochure delivery requirements. A
difference between the 2 is
A) federal covered advisers are exempt from the brochure delivery requirements to investment
company clients while state-registered advisers are not.
, B) state-registered advisers must deliver the brochure within 90 days of the end of their fiscal
year while covered advisers have 120 days.
C) state-registered advisers who do not deliver the brochure at least five days prior t correct
answers D) State-registered investment advisers who do not deliver the brochure at least 48
hours prior to entering the contract must offer a penalty-free withdrawal of five days. There is
nothing comparable to that in the federal law. Both have the 120-day delivery requirement, and
state-registered investment advisers cannot have investment companies as clients.
An estate-planning technique often recommended for those with large, taxable estates is the use
of
A)
the alternative valuation date.
B)
a testamentary trust.
C)
an irrevocable life insurance trust (ILIT).
D)
the capital needs analysis. correct answers C) For those with large, taxable estates, the purchase
of life insurance to cover the potential estate tax liability is frequently recommended. The use of
the ILIT will generally keep the proceeds out of the estate. The alternative valuation date helps
only if the value of the estate drops sometime during the six months after death. A testamentary
trust does little, if anything, to reduce estate taxes. The capital needs analysis is used to
determine the replacement value needed in the event of premature death—which is unlikely to be
needed with this large of an estate.
A 46-year-old investor wants to have retirement savings worth $1 million at age 70. If the
investor can earn 9%, using the rule of 72, the present value needed today is closest to
A)
$90,000.
B)
$125,000.
C)
$250,000.
D)
$500,000. correct answers B) The rule of 72 can be used to determine how long it takes for a
specific sum to double in value. If you know the rate of return (9% in this question), you divide
72 by that rate (72 divided by 9) to learn that money will double every 8 years. A 46-year-old
looking ahead to age 70 has 24 years (70 - 46) for the money to grow. If the IRA earning 9% will
double in value every 8 years, in 24 years, it will have doubled 3 times. If a number doubles 3
times, its value is 8 times the original amount (1 doubled is 2, doubled is 4, doubled is 8): $1
million ÷ 8 = $125,000. Another way to get the answer on the exam is to start with the answer
choices and see which one when doubled 3 times reaches $1 million. If you have $125,000
presently, the first doubling takes it to $250,000, the second to $500,000, and the third to $1
million.
A portfolio manager looking to create alpha would most likely use which of the following?
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